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Gulyas Joins Colleagues, Votes Against Tax Differential

SNOW HILL – In what was a rather quiet end to what has become an annual contentious debate, the County Commissioners on Tuesday voted unanimously to reject Ocean City’s request for compensation for duplicated services, or tax differential.

For years, Ocean City has requested tax differential compensation from the county for services it provides for its citizens that the county does not have to provide. It’s a complicated issue to be sure and perhaps the best example is law enforcement. The county provides law enforcement protection for the vast unincorporated areas of Worcester, while Ocean City, like the other municipalities, has its own police force that it must pay for from its own budget at taxpayers expense. In essence, taxpayers in Ocean City pay twice for police service, according to the tax differential concept.

Therefore, Ocean City officials believe the town should be compensated by the county for a service it does not have to provide inside the resort’s borders through tax differential. This year, Ocean City requested roughly $14 million from the county in tax differential. When the county initially balked at the concept in general and the dollar amount specifically, resort officials considered approaching its representatives in Annapolis to introduce legislation to affect the change.

Tax differential requests are not unique to Worcester County, however, the amount requested each year is unusually high because of the unique relationship between the county and the resort, particularly the latter’s contribution to the county tax base. Worcester’s policy for years has been to forego the tax differential payments, opting instead to compensate Ocean City and the other municipalities for duplicated services with a wide variety of restricted and unrestricted grants.

Counties in Maryland are divided into two categories regarding tax differential. “Shall” counties must provide tax relief to a municipality that provides duplicated services, while “may” counties, which include Worcester, do not have to automatically provide relief, even if there is evidence of a duplicated service.

Shortly before unveiling its fiscal year 2009 budget on Tuesday, County Commission President Virgil Shockley said the county is required by law to give the town a formal answer prior to its budget deliberations. He suggested the county continue to handle the issue the way it has traditionally.

“The county has always given the towns grants in the past,” he said. “That’s the way it has always been done, and in the upcoming budget, we will proceed to continue to do that.”

Commissioner Bob Cowger agreed the amount requested by the town was outside the county’s fiscal capability and urged his colleagues to continue with the grant approach.

“I don’t think we can do tax differential,” he said. “Maybe we can try to give them a little more in terms of grants. As far as tax differential, not only can we not do it, I wouldn’t want to do it.”

Commissioner Louise Gulyas represents Ocean City and has traditionally been an advocate for tax differential. However, citing the exorbitant request in what will be a difficult budget, she could not support the request this year.

“I do represent Ocean City and fight for everything they want, but on this particular item, I have to vote against tax differential,” she said. “I know that’s probably suicide, but that’s the way I feel about it. … I will promise them, just as I have always done, to fight for every penny they ask for in terms of grant money. This is a very hard decision on my part. I represent Ocean City, but I also represent the entire county.”